Starting in late 2010, WTI began to sell at a discount to
Brent due to rapid increases in crude oil production from tight
oil formations (This Week In Petroleum,
March 14, 2012), primarily from the Bakken formation in North
Dakota and the Eagle Ford shale in Texas, which led to
transportation bottlenecks in and around the Cushing, Oklahoma
storage hub where WTI oil is traded (This Week In
Petroleum, May 16, 2012).

Thus, Brent has become more representative of the
marginal cost of crude oil for the majority of refiners
in the Atlantic Basin. In the Rocky Mountain region and the
Midwest, discounted inland crudes are widely used by refiners.
However, because Midwest product markets also rely on products
produced outside of that region, product prices still reflect the
price of waterborne crudes that are best represented by the Brent
benchmark.

McColl says Brent will remain the benchmark unless or until
existing pipelines get reversed or new pipelines — including the
Keystone XL — come online.

"So long as we still have issues moving crude out of the
mid-continent, Brent will
matter far more to gas prices than WTI; LLS also matters
but Brent is good for
general-interest and direction. Viewing Brent as the price setter for gasoline is a
reasonable way to look at the direction of gas prices in the
future. While not perfect by any means, it can provide some
high-level insight."

On Friday, WTI oil closed at $89 per barrel. Brent oil
closed at $112 per barrel.